Personal Income, 2012q3

This morning the U.S. Bureau of Economic Analysis (BEA) released quarterly personal income data at the state level for 2012 Q3, along with some relatively minor revisions to previous quarters. In the third quarter, Total Personal Income in Oregon increased 0.8 percent, marking three full years of consecutive quarterly gains (2009q4 – 2012q3.) Over the past year, income in Oregon grew 4.4 percent which, while it is just a hair above our office’s latest forecast, is consistent with the slow growth expansion seen to date. The state’s relative rankings based on this latest data are good at 5th best in terms of year-over-year growth and 6th best in terms of quarter-over-quarter growth. Wages and Salaries, the largest component of personal income grew 0.6 percent over the quarter which ranks 9th best year-over-year and 6th best quarter-over-quarter. All other income components are up except for unemployment benefits which continue to decline for both good and bad reasons (more jobs and less unemployment but also individuals exhausting their benefits.) Farm Proprietors’ Income has seen very strong growth recently as commodity prices have generally remained high, however double-digit percentage swings (or much more) are the norm for income in this category. Farm income has certainly benefited from the high crop prices and while is currently at an all time high, at least in nominal terms, it is not too much larger than the levels seen in the late-80s, early-90s and mid-00s.

The table below details changes to the major income categories in Oregon. For more information on the definition of each component, please see the BEA’s glossary.

While increasing personal income is certainly good news, Oregon, along with the nation remains below pre-recessionary levels on an inflation-adjusted basis. The information above discuss personal income in nominal terms. Also, during recessions Transfer Payments and other automatic stabilizers kick in and substitute for some of the income loss due to job loss. As this happens, total income does not fall by as large of an amount as, say, wages do, as the transfer payments are able to prop up income to some degree. One way to gauge the true underlying state of income is to look at Total Personal Income minus Transfer Payments, on an inflation adjusted basis. As the graph below illustrates, Oregon’s real income less transfer payments remains 5 percent below pre-recession levels (the U.S. is 4 percent below). During the worst of the recession, Oregon fell a total of 12.5 percent (the U.S. fell 10.6 percent), so the current levels are a sizable improvement, however there remains 40 percent of the ground lost to make up to reach the levels from just before the recession.

Finally, the last two graphs illustrate personal income changes by state over the business cycle. The graph on the left compares the recessionary losses by state while the graph on the right compares expansionary gains. The dates used for calculating the peak and trough are state dependent to account for local economic conditions. E.g. Nevada’s income peaked first in 2008q1 so that is their peak date while West Virginia did not peak until 2008q4. For Oregon, the state experienced a 6.5 percent loss in income, ranking 37th largest among all states and D.C. (the U.S. lost 6.3 percent.) So far in expansion, Oregon has seen gains of 14.3 percent, which ranks 18th strongest (the U.S. has gained 13.8 percent.)